U.S. District Court Judge Richard Leon has ruled in favor of AT&T, granting the telecommunications giant the approval to go ahead with its acquisition deal with Time Warner.
The proposed $85 billion merger between the two companies had been legally challenged by the United States Department of Justice (DOJ) in a lawsuit filed in the Federal Court in Washington, D.C. in November, last year.
The DOJ contested the merger on the grounds that it violated antitrust law, arguing that AT&T could, potentially, “use its control of Time Warner’s popular programming as a weapon to harm competition.”
In his Tuesday (June 12) judgment, which brought the six-week-long trial to a decisive end, Judge Leon ruled that the plaintiff had failed to establish beyond doubt that the proposed merger was in violation of antitrust law.
Judge Leon’s ruling was comprehensively in favor of AT&T and Time Warner, in that he did not attach any conditions, whatsoever, to the massive merger’s approval.
“I’m surprised that AT&T won this without any conditions,” said Ketan Jhaveri – former Justice Department antitrust attorney and co-CEO of legal tech platform Bodhala.
“I would have thought the judge would have ordered a targeted divestiture,” he added.
“This was a defining case for antitrust enforcement in the US,” Jhaveri also said. “It does seem to be a complete and total victory for AT&T.”
The defeat was equally comprehensive for Donald Trump’s government, as the Judge discouraged the Justice Department to seek a stay, saying that a request like that would be “a manifest injustice” and to allow it would undermine the faith of the defendants, their shareholders, and the business community in the judiciary.
“I hope and trust that the government will have a good judgment, the wisdom, and the courage to avoid such a manifest injustice,” Judge Leon said in court.
“To do otherwise, I fear, would undermine the faith in our system of justice of not only the defendants but their millions of shareholders and the business community at large,” he added.
The decision saw Time Warner shares gain about 5 percent in extended trading, while AT&T shares dropped 2 percent.
AT&T welcomed the court’s decision to rubbish the government’s lawsuit seeking to block its merger with Time Warner – a decision that was announced a year and a half ago – and said that it would try and close the merger on or before June 20, as the agreement between the two companies expires on June 21.
“We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner,” AT&T General Counsel David McAtee said in a statement.
“We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative,” McAtee added.
The completion of the merger formalities would, effectively, give AT&T ownership of HBO, CNN, Warner Bros, DC Entertainment, as well as other Time Warner brands.
Visibly disappointed with the decision, Assistant Attorney General Makan Delrahim said that the DOJ still believed that the merger would be detrimental to competition and that they would consider their future line of action against the decision.
“We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner,” Delrahim said in a statement.
“We will closely review the Court’s opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers,” he added.
Time Warner was rather undiplomatic in its post-ruling statement, alleging that the Justice Department’s lawsuit was politically motivated; an unmistakable hint that the decision to bring the case to court was directly influenced by, none other than, POTUS himself.
The outcome of the lawsuit paves the way for similar mergers in the telecom and media industries.
Comcast had been waiting for the court’s decision to go in favor of AT&T so it could start a bidding war with Disney to purchase Twenty-First Century Fox assets, as early as Wednesday.
CNBC reported that “Comcast will formalize its all-cash offer to acquire most of Twenty-First Century Fox on Wednesday if U.S. District Court Judge Richard Leon approves AT&T’s deal for Time Warner on Tuesday, according to people familiar with the matter.”
After the ruling, BTIG Research analyst Rich Greenfield told CNNMoney that “Brian Roberts and Team Comcast are cleared to bid. The question is whether Disney is ready.”
The decision is being seen across industries as a precursor to many more similar mergers and acquisitions.
“It’s open season for vertical mergers,” said Chris Sagers, an antitrust law professor at the Cleveland-Marshall College of Law.
“The fact is that they’ve gotten a little easier, and we’ll see a big flurry of deals,” the professor predicted.
According to an AT&T spokesperson, CEO Randall Stephenson, who chose to stay put at the company’s Dallas HQ, learned about the ruling, to his obvious relief, through McAtee, who called him up with the good news.
AT&T made its plans to acquire Time Warner public in October 2016, following which Trump, who was running for president at the time, vowed that he would do everything to block the acquisition if he came to power.
“As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few,” he had said at the time.
And true to Trump’s word, the Justice Department sued a year later, saying in a pre-trial brief that “expertise and real-world experience alike will demonstrate that this proposed transaction poses an unacceptable threat to competition and consumers.”
“For current consumers of traditional pay-TV content, economic modeling shows that the merger will mean paying for the equivalent of 13 months of Turner content per year while getting only 12. That’s pure overcharge consumers will have to pay without getting anything in return,” the brief had said.